Fiscal Panorama 2024-2026
Key Objectives of the 2024 Financial Year-End Closing
The closing of the 2024 fiscal year for Albanian enterprises, particularly for SMEs (Small and Medium Enterprises), represents a fundamental process that goes beyond mere compliance with legal obligations. This phase is considered critical to ensuring successful results in the following year.
The primary objective is to obtain an accurate picture of financial performance, which includes summarizing all profits, expenses, and investments realized throughout the year. This overview is vital for assessing whether the planned financial targets were achieved. Additionally, a careful year-end closing is essential for preparing the financial statements required for tax filings and statutory reports (such as Financial Statements, Corporate Income Tax, VAT, etc.).
One of the most significant goals is forecasting financial trends and financial planning for the upcoming year. Early and accurate preparation helps businesses avoid unpleasant surprises, such as tax penalties or accounting inaccuracies, starting the year 2026 in a more secure financial and legal position.
Increased Formalization
The 2025 fiscal year, which will close accounting-wise in December and be declared in March 2026, marks the implementation of significant legal changes in Albania. These changes aim to increase the formalization of the economy and restructure the tax system for specific income categories.
An example is the new tax treatment for free professions (freelancers), addressing the phenomenon of "fictitious self-employment." The calculation of tax as employment income for these entities will commence on January 1, 2025. Furthermore, legal forecasts for 2026 include further easing and formalization measures, including a potential fiscal amnesty for old business debts.
From an administrative perspective, the system is entering a phase of increased accountability. An example of this is the lowering of the Personal Income Tax Declaration (DIVA) threshold from 2 million ALL to 1.2 million ALL, significantly increasing the number of individuals required to file—projected at over 144,000 declarants for DIVA 2024.
This period is characterized by high administrative pressure on professionals and businesses, exacerbated by the unification of the Corporate Income Tax (CIT) filing deadline with that of the DIVA on March 31, 2025. This unification increases the workload for accountants and economists, who must simultaneously manage the technical closing of company balance sheets and the individual declarations of a broad employee base. Such a heavy load in the January–March period increases the risk of delays and administrative errors, as demonstrated by the Tax Administration’s server issues that led to the extension of the CIT and DIVA deadlines for 2024 into April 2025.
To manage this pressure, it is essential for economists to complete the technical closing (inventory, depreciation, reconciliations) as early as possible in December, creating the necessary capacity for the urgent filings of the first quarter of 2025. This demanding regulatory environment emphasizes the need for external expertise and strategic planning.
Accurate 2024 Accounting Closing and Assessments
Closing the financial year requires a systematic approach and maximum precision in accounting, as the accuracy of these steps directly affects the calculation of the taxable base.
Detailed Year-End Inventory Procedures
A fundamental and legal duty for every business operating with goods, materials, or fixed assets is performing a physical inventory. The goal is to ensure that the quantity and value of the inventory reflected in the balance sheet and accounting ledgers accurately represent the actual stock.
This process requires the documentation and signing of inventory lists. If discrepancies between the actual state and the accounting records are discovered during the physical inventory, these differences must be clearly justified and immediately reflected in the accounting books. For instance, a manufacturing company may discover unnecessary or obsolete inventory, which requires a price reduction or impairment to clear the warehouse. This correction step is a strategic moment that can impact the year's net profit. External economists should request real stock lists from clients before December 20th to avoid delays in statement calculations.
Depreciation
Updating depreciation is a crucial technical step in preparing annual financial statements. Depreciation is a key accounting concept that allocates the cost of long-term assets over their useful life, adhering to the principle of matching expenses with revenues.
However, under the legal framework in Albania, two parallel depreciation calculations are typically required:
Accounting Purposes (NAS/IFRS)
According to National Accounting Standards (SKK 5), depreciation expense is based on the useful economic life of the asset. If there are indications that the recoverable value of the asset has fallen below its carrying value (e.g., a change in useful life such as planned replacement of buildings in 5 years), then an impairment test is performed and the asset's value is reduced.
Tax Target (DPT)
The fiscal law is more limited. Depreciation expense Expenses exceeding the maximum legal rates set by the General Directorate of Taxes are considered unknown (non-deductible) expenses for Profit Tax purposes. For this reason, depreciation must be calculated according to the maximum permissible rates, as this is one of the most important deductible expenses that reduces Profit Tax.
The correct regulation of depreciation is crucial as a professional must ensure that the Profit Tax (P/T) base is “clean” and protected from fiscal audits. If the business has based depreciation solely on useful life (according to IAS) and has deducted an expense higher than the maximum fiscal rate allowed, this excess will increase the tax liability, leading to penalties and late interest.
Account reconciliation and expense classification
For accurate closing, it must be ensured that all invoices (sales and purchases) and other financial transactions are included and recorded according to their dates. Review of accounts receivable and payable is mandatory.
Next, reconciliation between bank accounts and accounting records must be performed. Every payment and income recorded in accounting must match the bank movements.
Determining deductible and non-deductible expenses for tax purposes is a critical area. To be considered deductible, expenses must have been incurred in the direct interest of the economic activity, and must be proven and documented by the taxpayer through a VAT tax invoice, a simple tax invoice, or documents issued by legal entities (e.g., embassies, international organizations).
In this link You will find a short demonstration video on the preparation of financial statements.
Special care must be taken with unknown expenses for tax purposes. For example, expenses that exceed legal limits, such as depreciation above the allowed rate, are considered unallowable. Additionally, personal consumption expenses, such as housing rent for the accommodation of local or foreign employees, are not recognized for tax purposes, regardless of the conditions set in employment contracts.
This process of documenting and cleaning up books is the first line of defense against tax audits. Lack of accurate documentation for business expenses directly impacts the profit that will be taxed, requiring professional assistance to minimize the risk of penalties.
Read also Simplified Financial Statements.
Tax optimization
Fiscal optimization does not imply concealment or evasion, but rather the strategic use of all legal mechanisms to ensure that a business pays as little tax as possible within the legal framework.
Profit Tax Simulation
After the accounting records are reconciled and the necessary corrections are applied (depreciation, unknown expenses, etc.), Profit Tax must be calculated on an accurate scenario basis.
Analysts emphasize the importance of running a profit tax simulation (multiple scenarios) before December 31st. This preliminary calculation allows management to make last-minute strategic decisions to reduce taxable profit. These decisions may include realizing strategic deductible expenses, such as:
- Purchase of necessary inventory before year-end.
- Investments in equipment or machinery that qualify as fixed assets, generating depreciation expense immediately.
- Payment of mandatory expenses (such as year-end bills) that can be recognized as period costs.
In cases where a business results in losses, losses recognized by tax authorities can be carried forward and offset against profits in the next five tax periods, following the “first-in, first-out” principle. For carrying forward losses from capital investments exceeding 1 billion Lek, additional documentation is required from the Regional Tax Directorate.
Profit and Dividend Destination
The decision on the destination of profit after tax is a critical strategic moment for every commercial company. After paying the Profit Tax, companies are obligated, within a period of 6 months from the closing date of the financial year (approximately until July 31 of the following year), to approve the financial results at the shareholders' meeting or the competent decision-making body.
During this process, it must be determined:
- Total of legal reserves.
- The portion to be used for investments or capital increase.
- The part to be distributed as dividends.
Another essential obligation is the submission of the profit allocation decision to the tax administration no later than July 31st of the calendar year, even if the result of the fiscal year was a loss. Failure to submit this decision on time is punishable by a fine of 10,000 Lek.
As for Dividend Estimate, The legal entity must declare and pay the tax due on dividends to the tax administration no later than August 20 of the year the results are approved. This payment obligation arises regardless of whether the dividend distribution has actually been made or not.
This rule creates a significant cash flow issue. If the business has limited liquidity, distributing a large portion of profits as dividends can create financial pressure in August, as taxes must be paid even if partners postpone withdrawing funds. For this reason, many economists advise an investment strategy: by using after-tax profits for investments or capital increases within this 6-month period, businesses can reduce the amount of taxable dividends (taxes), easing the liquidity burden in August and putting the capital to work for 2025 growth.
Legal Reporting and Auditing Obligations
The conclusion of the accounting phase is followed by the fulfillment of legal obligations for declaration and submission of annual financial statements.
Unified Profit Tax Rates and DIVA 2024
The maximum deadline for businesses and individuals in the first quarter of 2025 was March 31, 2025, which served as the final deadline for submitting two essential declarations: the Annual Profit Tax Return (T/F) for 2024 and the Annual Personal Income Statement (DIVA) for 2024. Although March 31 was the deadline, it can sometimes be extended due to official holidays or technical system issues, as happened when it was extended to April 1, 2025.
For DIVA, this deadline applies to resident and non-resident individuals who during 2024:
- They had a gross annual salary of over 1.2 million Lek.
- You are employed by two employers (at least for one tax period).
- Generate income from other sources exceeding 50,000 lekë per year for which tax has not been withheld at source.
The Tax Administration generates the DIVA 2025 pre-filled declaration automatically with annual employment income data. However, the fields remain free and changeable, requiring the declarant to verify and, if necessary, change them. Failure to submit on time can result in a fine (e.g., 3,000 Lek for DIVA), to which interest and late penalties are added.
Submission of Financial Statements to the National Business Center (NBC)
In addition to the fiscal declaration at the Tax and Customs Administration, annual financial statements (Balance Sheet, Income Statement, Cash Flow Statement) must also be deposited at the National Business Center (NBC). This electronic service is offered through e-Albania portal. The submission deadline at the KB is July 31 of the following year, but it must be confirmed with the latest instructions.
For a portion of the subjects, a Legal Audit of the annual financial statements is also required. The audit is mandatory for:
- All commercial companies that apply International Financial Reporting Standards (IFRS).
- All joint-stock companies (Sh.A.) that apply National Accounting Standards (SKK).
- Limited Liability Companies (LLCs) that exceed certain thresholds, which are detailed in specific laws.
During the application process at the QKB, the user must upload the legal auditor's report and the decision for their appointment. All these reports must comply with the valid accounting standards (SKK or SNRF), which are published by the National Accounting Council (KKK).
Key Fiscal Changes Taking Effect
The regulatory environment in Albania is in constant motion, requiring businesses to update their strategies to accommodate new legislation, particularly that aimed at increasing the tax base and formalization.
New Rules for Liberal Professions: Addressing “Fictitious Self-Employment”
The most significant change affecting freelancers and service businesses is the entry into force, from January 1, 2025, of new rules on “fictitious self-employment.” This measure aims to address the “1 business = 1 employee = 1 client” phenomenon.
Calculation of tax as income from employment (my name is norma tatimi 13% leather 23%) shall apply to self-employed professional service providers who meet one of the following criteria:
- They provide 80% of gross revenue from a single client.
- Sigurojnë 90% të të ardhurave bruto nga më pak se 3 klientë.
For this category, the tax liability will be calculated for the 2025 tax period and paid by March 2026. Taxable profit tax will be calculated after deducting business expenses. This change has an immediate strategic implication: professionals and service businesses must urgently assess their client base and, if necessary, restructure contractual relationships to diversify income sources and avoid a sudden increase in the tax burden.
TVSH for Non-Resident Digital Services
Another significant regulatory development is the approval of new fiscal rules that compel non-resident online giants (like Netflix, Google, and other digital companies) to pay Albanian VAT of 20%% on services provided in Albania.
This action aims to formalize the B2C (Business to Consumer) digital market. The main effect is the reduction of the fiscal competitive advantage that foreign operators have had over local businesses, creating a more level playing field in the Albanian market.
Draft Law on Fiscal Amnesty (Debt Forgiveness)
Expected changes for 2026 include Legal proposals for the erasure and extinction of obligations tax and customs, often referred to as tax amnesties. Based on the proposals of the Ministry of Finance and Economy, this amnesty will aim to legalize money earned from work, but which has not been justified or declared on time.
The government's goal is to close old legitimate debts and bring money earned legally but unjustifiably into the formal system. However, the draft law provides a long list of exceptions to ensure that no funds obtained from criminal activities are legalized. Excluded from this amnesty are:
- Public officials and their family members.
- Subjects with criminal records in Albania.
- All subjects that are part of the OFL law (Law Enforcement Operation).
The procedure will be carried out through a self-declaration format. After applying, a special group from the tax administration will exchange data with other institutions to verify whether individuals are subject to the amnesty or not.
All these fiscal changes – the reduction of the DIVA threshold, the taxation of fictitious self-employment, and the regulation of digital VAT – signal a consolidated state strategy towards broadening the tax base by formalizing the grey areas of the economy. This requires higher accountability and more detailed accounting records from businesses.
Read also Expected Tax Legal Changes for 2026
My contract for accounting services and digitization
Faced with increasing regulatory complexity and tight deadlines, many small and medium-sized businesses are seeing outsourced consulting services as a more efficient and strategic solution.
Benefits of an External Economist
Partnering with an external accountant or accounting firm (outsourcing) can be a profitable decision for small businesses in Albania. Outsourced services offer greater flexibility and cost savings. Compared to hiring a full-time accountant (which incurs fixed salaries and additional costs), a consulting firm provides an entire team of experts (tax, finance, strategic planning) at a much lower and predictable cost. This means businesses benefit from extensive expertise without the financial burden of direct employment.
Besides cost savings, outsourcing services offer a strategic dimension. An external partner helps in drafting the annual budget and monthly reports that provide a clear picture of financial flow. This enables management to make data-driven decisions, optimize savings, and identify unnecessary expenses. Most importantly, collaborating with licensed specialists minimizes the risk of penalties, as they ensure every accounting document and declaration is verified and submitted correctly and on time, allowing businesses to focus on their development, not routine tasks.
Read also Is it better to hire a full-time economist or to collaborate with an external accounting firm?
Fiscalization and Accounting Programs
Digitalization has transformed the way bookkeeping and fiscal reporting are done. Government platforms like Self-care and the e-invoicing system play a key role. Digital e-invoicing transforms fiscal reporting and enables automatic pre-filling of VAT declarations from the purchasing system.
Regarding internal accounting, modern technology, such as accounting software and online tools for small businesses (like Alpha Web, Financa 5, QuickBooks, Odoo, Microsoft Navision, Wave, etc.), offers a number of benefits. The main benefit of a “real-time” accounting information system is the ability for sustainable financial planning.
In an increasingly complex regulatory environment (with the introduction of digital VAT and self-employment tax), SMEs' need for advice has shifted from simply record-keeping to strategic planning. Advanced software and external expertise enable the strategic organization of tax declarations for income allocation and the utilization of tax credits, with the goal of the business paying as little tax as legally possible. This combination of tax expertise with technology offers a crucial competitive advantage.
How does AlProfit Consult specifically help?
AlProfit Consult is more than just an accounting firm. We help businesses save time and money by avoiding costly mistakes, filing delays, or unnecessary burdens on internal staff. What sets us apart is our commitment to building a positive collaborative experience at every step, acting as true partners, not just service providers.
We only work with businesses registered in Albania that do not require the daily physical presence of an economist in their office. Our clients are typically medium-sized businesses with up to 50 employees and monthly revenues up to 100,000 euros. We do not offer services to NGOs. For this group of businesses, we offer a simple, reliable, and affordably priced solution.
Our services are divided into five categories:
Accounting and preparation of financial statements,
– Tax declarations and monitoring of fiscal legislation,
– Communication and representation before institutions,
– Financial consulting for smart decision-making,
– Operational assistance in making payments, preparing invoices, and other support services.
To ensure clear and effective collaboration, we offer three Monthly subscription package – Start, Standard, and Premium – which vary depending on the complexity and needs of the business.
The initial business registration is fully speaks.
Each fee is monthly, fixed, and unchanging throughout the year, regardless of the number of declarations, balance sheet preparation, or other reports. At the end of each year, we review the chosen package level together with the client to ensure it continues to be in line with business progress and actual needs.